NEW YORK-Lucent Technologies Inc., the Murray Hill, N.J., telecom equipment company spun off from AT&T Corp. in 1996, announced plans last week to divest the slower growing parts of its business in an initial public offering later this year. The effort will allow the company to focus on high technology businesses including wireless.
Lucent will divest those units that serve large corporations, including 90 percent of those in the Fortune 500, by providing switchboard operations, cabling systems, operator call centers, local area networks and related technologies and services. Lucent’s Octel messaging business also will become part of the spin-off.
The new, yet-to-be-named company will start out with $8 billion of Lucent’s $38 billion in annual revenues.
In a statement, Richard McGinn, Lucent chairman and chief executive officer, said: “Lucent will concentrate greater resources on the fast-growing areas like optical networking, Internet infrastructure, wireless, semiconductors, optoelectronics, Web-based enterprise solutions linking private to public networks and professional design and consulting services for service providers.”
Shares of Lucent’s stock closed at $71.94, up $3.31 at the close of trading March 2. Several brokerage firms, including Banc of America Securities and Gruntal & Co., raised their outlook for the company in response to the news.
However, at least one firm, Warburg Dillon Read, said it would maintain its “hold” recommendation as it looks for “more confidence that the service provider business can hit management’s growth objectives for the year … of growing the company three-to-five percentage points greater than the industry average of 14 percent.”
Nikos Theodosopoulos, communications equipment analyst for Warburg Dillon Read, took note of recent speculation that Lucent might also spin off its Microelectronics division.
“While we believe this clearly would be a value creating move, we do not think it is likely in the near term … [because] the Microelectronics and Service Provider business units share the common and core [research and development] effort,” he said.
Although the investment bank’s communications equipment analyst group views a spin-off of the Microelectronics division as unlikely in the near term, its members also expressed belief “this business would trade at a high valuation.”
